Select Committee on European Communities Report

Examination of witnesses (Questions 20 - 39)



Lord Hoffmann

  20.  I want to know whether anybody is taking an interest in the reform of the Court structure. This Committee recently did a report on the Court of First Instance which is getting gummed up with work and was making a very modest proposal for changes in its rules to enable it to organise its resources more efficiently. I think both Courts feel that they need quite a lot of loosening up in the structure that is imposed on them by the Council's rules in order to be able to cope with the work that they are doing. They also feel, at least those I have spoken to, that there is not any real political interest in doing something about it. I wonder what you feel about that.
  (Mr Henderson)  We are aware of the problem. I think all Members of the Council are aware of the problem. There is this proposal that the Court of First Instance should sit with one judge rather than more than one judge and that seems a reasonable proposition to us and we would support that. The idea that there should be more judges appointed to deal with the matter is one that we are not so keen on. We think that proposal should be supported and when we get the opportunity to support that we will.

  21.  I quite understand about having more judges but then the only other solution is to make more efficient use of the judges you have and that sort of proposal of the Court of First Instance is just a drop in the bucket compared to the difficulties they are having in dealing with their work?
  (Mr Henderson)  I am not familiar with all the detail apart from that major point, but I would be happy to look at that if there are any specific suggestions you think would be helpful. We are enthusiastic that the Court should work effectively and if that can be done without a huge increase in resources, then we would certainly want to support that.

Lord Borrie

  22.  I suppose we are reactive to proposals of others such as the one to which Lord Hoffmann has been referring with regard to the Court of First Instance and the way in which some improvement can be obtained by a single judge making the decision and we reported favourably, in the way in which the Government is also favourable, but we are going to have enlargement; we are going to have a lot of cases dealing with technical matters such as trademarks cases that are coming along inexorably, whether people want them or not, and there seems to be no particular movement from the powers-that-be in terms of ensuring that over the next few years, let alone further, the European Court of Justice and the Court of First Instance will be adequately staffed, resourced and so on, to cope with that, which is an anxiety which I wonder if you share with me?
  (Mr Henderson)  Yes. Sometimes I have difficulty in defending the Courts in another place. Some people take the view that the Courts should stay out of business but our view is that where it is appropriate for the Court to have a role then it should be able to give effect to that role without delay and in a way that is responsive to the needs of the Community. I think it is wise to review these things every so often to make sure that the Court is able to deal with some of the things that you suggest might arise. I am quite sure you are right on that and there will be lots of arguments about these things and if the provision for the Court to sit with one judge is at least a partial solution, then I think that would be welcome. If there are other suggestions that can be made, then I would be happy to look at any proposals, and I am sure they can come through the appropriate government departments.

  23.  Do you think that some of the lack of interest arises from the fact that people in the other place do disapprove of the Court being there at all? If you do disapprove of the Court being there at all, it seems an odd solution to produce a situation in which it takes them two or three years to produce a judgment?
  (Mr Henderson)  I think there is an element of that on some of the benches in the other place.

Lord Bridges

  24.  Could I ask a question about the Common Foreign and Security Policy. There was a recent report from a Committee in your House recommending there should be more parliamentary scrutiny of the Second Pillar. Do you think that is possible and how could that best be done?
  (Mr Henderson)  In terms of principle, we very much support that. I think one has to recognise that a lot of decisions that are taken in CFSP are taken at very short notice because of the nature of those particular events and, therefore, it will not always be possible to provide papers in advance. Indeed, there are no papers in many cases. A lot of decisions of the CFSP in my experience on the Council—and my colleagues, especially Mr Jones Parry, will be able to confirm this—are taken literally a day or two sometimes after the event has happened and the papers are really prepared on the day. Often the discussion takes place without papers and then there is a paper drafted to reflect the discussion which is then confirmed. It then leads to action if there is action necessary by the Commission or whatever. So given that restraint, we very much support that. Occasionally there may be matters of confidence of security which would not be appropriate, but I think most of the time it would be appropriate to have the scrutiny where it is allowed for, but many of the decisions have to be taken very quickly. I do not know whether Mr Jones Parry would like to add to that.
  (Mr Jones Parry)  I would only add, my Lord Chairman, that one of the things we tried in the British Presidency was to have better handling of business and that constituted in part making sure that Councillors did not suddenly, over a lunchtime or on occasion almost capriciously, take it on themselves to have a policy on country X or whatever the situation was, so we put a high premium on proper preparation through the Political Committee, through COREPER and then a proper text going to the Council. That meant, we thought, that we would get better decisions at the end of the day. Where that process is followed and where it is quite clear that Councillors have notice of it, which would permit us to go through some form of dialogue and discussion again, then I think the Government would be very happy to do that. The only proviso would be in certain cases where ministers in the Council would need to respond to urgent situations which came up genuinely at short notice and where there was need for a response. If we put those aside as a category which would be the subject of subsequent notification, then I think the Government would be very well disposed.

  25.  In this Committee we are very familiar with these situations but on the whole we do manage to have working arrangements with departments so that if something of this kind is coming up we can be given warning, if possible; if not, a rapid explanation after the event. But there is another aspect of this which is of interest to our Committee here. Of course, this is not an area in which the Select Committee in the Commons have hitherto operated and there would be some boundary questions between the two Houses. I do not know what my Lord Chairman thinks of this but it seems to me this is something that we ought to get straight so that we each know what we are doing.
  (Mr Henderson)  The Modernisation Committee of the House—I think it is agreed in principle already that there should be scrutiny on Pillars 2 and 3—still has to work out some detail. One of the things I think would be helpful is if the Clerks could be in contact with the officials to look at some of the practicalities. We would be very happy from our office to provide some of our officials to take part in that dialogue, again looking at the detail and the nitty-gritty of how it could work.

Lord Bridges]  That is very helpful.

Chairman]  That is very helpful because we do sometimes feel a bit jealous of our Scandinavian colleagues, who claim at least that they mandate their ministers before they go. I suspect that it is not quite as simple as that.

Lord Bridges]  I suspect sometimes the Clerk accompanies the delegation to the Council of Ministers and is available for rapid consultation.


  26.  Nevertheless, I think if we are talking about transparency and the role of the citizen in all this, then anything we can do to improve the flow of information between governments is to be welcomed. I think that one of the disappointing things about the British Presidency as far as we were concerned was that there was not really much improvement in the laying of documents, not by the FCO particularly but in general by departments, and there is a long black book building up of correspondence with ministers.
  (Mr Henderson)  I did anticipate that you would identify this issue and I specifically raised it with the President of the Commission, Jacques Santer, to press him to try to implement the terms, because these are not controversial terms in the Amsterdam Treaty, but there are a lot of administrative changes that need to be made in the Commission. He is committed to the principle and the Commission are currently looking at what changes they need to make to their system to be able to accommodate the needs that people like yourselves have and, of course, the electronic transmission is something which should help.

  27.  I think there are two issues here. We have identified one in terms of transmission of information from the Commission to the Council and to the various countries, but there is also the fact that in every Presidency there is a felt need to cram as much into the agenda as they possibly can in the last few weeks and things are not being properly scrutinised by Parliaments. I know that Sub-Committee B in particular have had difficulties in this area.
  (Mr Henderson)  We have asked all the government departments and have instructed them to be mindful of their responsibilities in this regard and to look in the future to having to put in a better performance. I hope they will be mindful of our prodding and that your needs will be met.

Chairman]  Thank you. We will keep prodding.

Lord Geddes]  As long as they keep mindful.

Chairman]  That really takes us on to access and information.

Lord Walpole

  28.  I was wondering what progress the Council is actually making in allowing greater access to information about its own activities?
  (Mr Henderson)  During our Presidency we managed to get agreement that there will be a register of public documents and I think that should be available—Mr Gass will know—from about January 1999. I think that will be important in that it creates a different climate. We have opened up the Council meetings, we have invited lots of people to observe what happens and some of it was on the Internet. I appeared on the Internet on the day of one of the Council meetings and talked to people in different parts of Europe about what had happened. We are committed to opening up CFSP, and indeed the Foreign Secretary addressed the European Parliament for the first time on these issues and I myself have dealt with them on a number of occasions. Domestically, as I have already mentioned, we very much support improving scrutiny under Pillars 2 and 3.


  29.  We feel there has been a culture of greater secrecy in the Council than there has been in the Commission strangely enough over the last few years. It has been much more difficult to get information out of the Council. There was a time when you could not even get access to the agenda after the Council meeting. I think the Ombudsman has done something to free up that position.
  (Mr Henderson)  There is now greater access to Government documents. There are very many press conferences that take place and they are open to anyone to come along and ask what has happened. We would encourage more transparency in the discussions of the Council although clearly there are areas where it would not be appropriate because often the importance of a Council decision is that it is a unanimous decision and that gives the EU strength in an external situation. If it was shown before unanimity was reached that there were differences of view then I think that could be exploited in a damaging way.

Baroness Hilton of Eggardon

  30.  Our concern is not just the Council but also the many committees that seem to advise the Commission endlessly in relation to environmental Directives. Scientific data are apparently the basis of the Directive but we are not allowed to know who the scientists are or what the scientific research has been or what the committee has been that has recommended particular standards for bathing water or drinking water or whatever. That seems to us to be totally contrary to normal scientific procedure that is based on peer review and knowing exactly what the research has been. That has made it very difficult for us looking at some of the draft Directives on environmental matters and it is quite idiotic not being allowed to know who the national experts are, who the scientists are or what the science is on which the Directives have been based.
  (Mr Henderson)  Our position is we are in favour of more openness in these matters. I find what you say strange, I would have thought if one wants to impress on someone else the scientific evidence one has is legitimate one would want to at least mention who it was that drew up the evidence.

Baroness Hilton of Eggardon]  We have commented on this endlessly.


  31.  It has been a bone of contention for a long time, particularly from Sub-Committee C which is the environmental committee. When you have got a couple of Fellows of the Royal Society of Chemistry sitting on your Sub-Committee and they say "The science on which this Directive is based is crap", although they do not use words like that in this place, of course, but that is the meaning of it, then somebody ought to sit up and take notice and say "It is not, because we have the authority of so and so and this is what it is based on". We do not get any feedback from them.
  (Mr Henderson)  The Commission are currently looking at the organisation of comitology. I am quite interested in this, I was not aware of this criticism. If I was to be briefed in more detail by the Clerk I would be happy to look into this further and come back to you.

Baroness Hilton of Eggardon

  32.  Could I also say that Mr Gass was nodding his head when I was putting my question so I think Mr Gass is aware of this problem.
  (Mr Jones Parry)  He has this affectation.
  (Mr Henderson)  It is probably a breach of parliamentary privilege for me to suggest that Mr Gass might be giving ponies out to get a question like this in the first place.

Baroness Hilton of Eggardon]  We have been complaining about this ever since I have been Chairman, which is three years now.

Lord Bridges

  33.  And longer than that. The impression that I formed when I was on that Committee was that if you had a Commissioner, say, who was German and a Deputy Director who was Dutch, they would have very good access to Northern European scientific evidence, and this might be over the pollution of maritime waters or something like that, but they did not actually know what was happening in our waters or they had no access to our scientific evidence so the net of collecting evidence was defective: they went to the place which was closest, which was understandable, but it was not as comprehensive as it should be.
  (Mr Henderson)  I certainly want to look at that, if I can write back to you after undertaking some examination.

  34.  Could I ask you a question about arms exports. We have now a Code of Conduct. Can you tell us anything about the criteria and how you think they will work? If I could add a second question. I remember in Sir Richard Scott's report on the Arms to Iraq saga there was quite a lengthy passage about the changes which were needed to bring our national legislation up to date. Much of it is emergency legislation hurried through on the eve of the Second World War which is still used as part of the apparatus for controlling exports of arms. We had a debate on this report in the House and I spoke on this subject and I was the only Member of the House who spoke who took it up. Lord Peston, then in Opposition, now in supporting Government, wound up for the Opposition and said this was an important matter which would be taken into account by the future Labour Government. I just wonder how these two things fit together? We have got some national legislation which needs updating and we now have a Community Code, how do these two things fit together?
  (Mr Henderson)  I am afraid I cannot comment on the national legislation without some notice, I think it would be unwise of me. In relation to the European Code of Conduct, essentially it is taking the principles that we apply as a nation that we should not be exporting arms if there is a likelihood they will be used for external aggression or internal suppression. It is applying that across the European level and is building in provisions. The great fear of people is if we say it is wrong politically or morally to export arms to a particular country then it is completely without purpose if the next day somebody else in another country exports the very same product and the only result is that British workers are out of work. There is a need to have a position which holds over a broader front. We think we now have that. In a sense it is an advisory code. I think it puts huge pressure on every country to do the decent thing. If country B is told by country A that they have not exported arms to a particular country for whatever reason then they cannot export without notifying country A, I think that puts a lot of pressure on them not to export. That is what is achieved by the Code.

  35.  The distinction between internal suppression and defending your external frontiers is not always terribly helpful, as might be observed in the case of Kosovo today.
  (Mr Henderson)  That is why there is always a judgment in this. That was how in the past it was easy to evade the International Court's recent opinion. The argument usually was "we do not agree with your opinion". Now if a particular country says "we are not exporting for whatever reason", if another country decides to export they have to notify that country they intend to do that so there is then a possibility for discussion and debate before it happens. There was some accusation that the Code means you are notifying potential competitors of business. In my experience of these matters, some of which is while I have been a Member of another place and some of it before I was there, these are international markets that are pretty well-known by the various potential suppliers and they usually know who is trying to supply who with what.

Lord Hussey of North Bradley]  Could I get back to the priorities of the Austrian Presidency. As I understand it they have gone on record as saying one of their primary objectives is to accelerate the rate of tax harmonisation which seems to me to create quite a wide number of problems. They are talking about transition raising of VAT, a Directive on Energy which cuts right across government policy I would have thought, a Code of Conduct on corporate taxation, taxes on savings. These are issues that are likely to affect the City of London and business generally.

Lord Bridges]  There was alarm in the Isle of Man and the Channel Islands over this.

Lord Hussey of North Bradley

  36.  Perhaps you would like to comment on that?
  (Mr Henderson)  The Austrians have told me that it is not a priority for them. It is something that is in the system that they are dealing with. There was a Code of Conduct which was issued within the last 12 months, which related to standards in financial centres. It was not binding, it was an advisory code and it was taking forward some of the work of that. One of the things which has been looked at is the question of taxation of savings but it was not particularly raised by the Austrians. We have made clear in our discussions that before we agree to any code we would want to be absolutely assured that there would be no negative effect on British savers or on the City of London.

  37.  I see that the Austrian Finance Minister, Rudolf Edlinger, launches this as one of his big ideas at the Congress in the immediate future in Vienna, perhaps the Congress you were talking about?
  (Mr Henderson)  I do not want to provoke an argument between different sections. As I understand it, the position of the Austrian Government is that it is a matter of routine, that they are doing the business as they are required to do, and I think the Austrian Ambassador to the United Kingdom wrote in similar terms to The Times recently to clarify the Austrian position.

Lord Bridges

  38.  It is very important in Germany also. The Germans tried for years to stop the Luxembourg Government from allowing the payment of interest on deposits by German citizens without tax. I think they have finally got somewhere on that and I believe they are now moving forward, possibly hoping to use the Austrian Presidency in order to prevent other people from dodging some of the money that should be going into the Community budget. I think that is part of what is happening and it seems to be evoking quite a considerable response on the part of the Commission. In Spain recently I read in a Spanish newspaper about the efforts which were being made by the Commission to stamp out tax havens in Britain in particular.
  (Mr Henderson)  I think we know where the Spaniards are coming from on that. I think it is in the interests of every financial centre, wherever it is located, that it is able to demonstrate that there are firm regulations that apply and international standards that apply, and I think in the long term that can help to generate business and not discourage business.
  (Mr Jones Parry)  May I add, my Lord Chairman, there are two aspects to taxation, it seems to me. One is that it is perceived and presented by the Commission and some Member States as being part of the internal market and that logically, as we come to the end of the internal market, this is one of the difficult issues which needs to be addressed. So there is a philosophical reason for doing it but there is also a practical reason. As Lord Bridges said, in the case of the German Government it is actually a loss of revenue to the German Government at the expense of deposits made in Luxembourg which are not subject to tax. But there are other ways of addressing that: compulsory notification of deposits to the tax authority of the resident is one way round it. We have spelled out very clearly nationally what the United Kingdom position is. That has been done by Treasury ministers in the ECOFIN Council. It is one thing to agree a Code of Conduct and agree a general trend of policy which is towards co-ordination of tax policies, where Member States want to do it, but it is another thing to accept a taxation which is actually detrimental to the interests of the City and to parts of the United Kingdom. So we are very vigilant on that.

Chairman]  That is very encouraging.

Lord Bridges

  39.  Is there not a Protocol to our Treaty of Accession which allows us to do what we do in the Channel Islands? I thought we negotiated that particularly at the time?
  (Mr Jones Parry)  There is certainly a Protocol which covers the position in the Channel Islands. It is the case, though, that in some other territories the tax regimes have not been quite so transparent and aboveboard and there is certainly a British interest as a British dimension to try to make sure that there is good government, good taxation policy, throughout.

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